The COVID-19 pandemic has brought unprecedented challenges and changes to the US commercial real estate market in 2020. According to the research data from CenterSquare Investment Management, one of the leading real asset managers, in April 2020, only about 15% of rent was collected by major US mall operators. However, there were signs of recovery in June and July, with about 65% of tenants starting to pay rent again. By September, US retailers had paid around 86% of rent in total, a 10% drop year-over-year but an 83% increase month-over-month.
Sharp declines in retail sales and rent collection
As the pandemic hit and lockdown orders went into effect, core US retail sales plunged to below $4.2 trillion in Q2 2020, the lowest level since 2013. At the same time, thousands of retailers and restaurants had to close down branches and lay off employees just to stay afloat. Landlords and commercial property owners also took a big hit with extremely low rent collection rates in the first few months. Government stimulus packages later in the year helped provide much-needed relief.
Accelerated growth of e-commerce
While traditional retail crumbled under the weight of the pandemic, e-commerce emerged as a clear winner. According to Cushman & Wakefield, the e-commerce share of total US retail sales exceeded 20% in 2020, growing nearly 5% year-over-year. With more people shopping online during lockdowns, major e-tailers like Amazon saw explosive revenue growth.
Uneven market recovery
As vaccine rollouts accelerate in 2021 and the economy starts to reopen, the retail recovery remains uneven across sectors. Categories like sporting goods, electronics, and food & beverages have already exceeded pre-pandemic levels, while sectors tied to entertainment and tourism are recovering slower. Geographically, cities with strong population growth like Nashville, Austin, and Miami are leading the rebound.
While the pandemic devastated much of the US retail real estate market in 2020, government stimulus and the rise of e-commerce have facilitated recovery. Investment managers like CenterSquare expect full revival driven by increased consumer confidence and employment growth in 2021.